Tax and stimulus proposals:
As of the date of publication of this material, the Biden administration’s stated priority appears to be addressing the COVID-19 pandemic and the related economic fallout. With Democrats having a narrow majority in the House and the potential to break ties in a 50-50 Senate, there is certainly a possibility that some revenue-raising tax changes will find their way into legislation. The first part of the administration’s relief plan is the $1.9 trillion American Rescue Plan aimed at facilitating vaccine administration and providing direct relief to individuals, and state and local governments.
Some highlights of this plan include:
• $1,400 stimulus check for individuals (in addition
to the $600 passed in December 2020 as part of the
Consolidated Appropriations Act)*
• Maximum child tax care credit increased to $3,000
per child under age 18 ($3,600 for children under six)*
• Child and dependent care tax credit increased to $4,000
(one child) and $8,000 (two or more children)*
• Federal unemployment insurance benefits of $300
per week extended through September 6, 2021
• $15 billion in funding for Small Business Administration
Economic Injury Disaster Loans Advance grant program
• $28.6 million for businesses in the food service industry
• $7.25 billion for Paycheck Protection Program
• $350 billion in flexible aid for state, local, and
• $170 billion to support school reopening and
post-secondary education funding
In 2021, President Biden announced two programs to support infrastructure and families. To pay for these programs, he proposed the following tax changes:
• Capital gains and qualified dividends. For taxpayers
with income above $1 million, a tax rate of 39.6% would
be applied on long-term capital gains.
• Ordinary income. The top ordinary income rate for
individuals would increase to 39.6% from 37%.
• Real estate 1031 exchange. Availability may be impacted
for those with capital gains exceeding $500,000.
• Inherited assets basis. Step-up in basis to fair market value at death would be eliminated for gains in excess of $1 million ($2.5 million per couple when combined with existing personal residence exemptions).
• Corporate tax rate. Increasing the corporate tax rate from 21% to 28%, and imposing a 15% minimum tax on “book income” (the amount of income reported
by corporations on their financial statements).
To read full article and view important deadlines, visit: https://www08.wellsfargomedia.com/assets/pdf/personal/the-private-bank/2021_Tax_Planning_Guide_ADA.pdf